Starting in August 2020, the long-awaited European Union – Vietnam Free Trade Agreement (EVFTA) has finally come into effect, which would have direct impacts on Vietnam’s economic development and strategic position in the global economy.
This ambitious trade deal grants Vietnam with almost unfettered access to the EU’s over 700-million-people economy by eliminating the majority of tariff and non-tariff barriers after 10 years, thus boosting Vietnam’s exports to the EU by 18% or Euro 15 billion by 2035 . According to Vietnam’s Ministry of Industry and Trade (MOIT), EVFTA would contribute to the annual GDP growth of up to 3.2%, 5.3%, and 7.7% after 5, 10, and 15 years of implementation respectively. Furthermore, expanding bilateral trade in intermediate goods and services with the EU is a prime opportunity for Vietnam, especially for local small and medium enterprises (SMEs), to enhance a strategic position in the Global Value Chain (GVC). Now with added endorsement from the agreement, European firms, Bosch included, could prioritize the use of local SMEs and locally sourced labour, goods and services to maximize local spending and building up business capacity and supplier networks within the country.
Additionally, EVFTA is likely to offer far-reaching benefits for Vietnam’s economic competitiveness by accelerating the country’s commitment to comply with international standards and through FDI’s technology spillover effect. In order to meet with the EU’s strict requirements, it is imperative that Vietnam commits to decisive institutional reforms to strengthen and standardise rules, especially in areas of the environment, investment protection, labour standards, and intellectual property. Therefore, EVFTA contributes to the creation of a fairer, more balanced and sustainable economy of Vietnam. The country’s youthful population becomes a strategic advantage, especially when coupled with a clear direction for their developing and upskilling. Bosch offers TGA – a German-standard vocational training of Technical Industrial Apprenticeship in collaboration with LILLAMA2 – as part of the its strategic roadmap and commitment to build Vietnam’s labour capacity in response to market development. In addition, Bosch in Vietnam collaborates and participates in several student and entrepreneurial initiatives as sponsors in both funding and expertise to grow the country’s labour resources.
Moreover, with EVFTA, Vietnam stands in front of substantial inflow of the EU’s quality foreign investments, products and services. European technology spillover and knowhow transfer would together promote the development of the local private sector’s capability, thus making the Vietnamese economy more competitive and innovative. Bosch in Vietnam is at the forefront of digitalization process in key areas that it operates, notably mobility and factory automation. Thus, the company is at an advantageous position to transfer the technical know-how from developed to developing nations, especially when the German industry is known for its systematic and cost-effective approach to industrial transformation.
EVFTA was concluded in an eventful year with Covid-19 bringing serious damage to the global economy, and Vietnam is no exception. It is highly expected that potential benefits of this trade deal would help Vietnam to bounce back strongly. For this to happen, within the framework of the agreement, Bosch and other European firms in Vietnam would be the forefront agents to drive this collaboration between the two trading blocks.